Striving for banking system stability
September 03, 2011 | BY
clpstaff &clp articlesNew measures from China's banking regulator aim to prevent financial institutions from becoming over-leveraged, and they provide a clear framework on accountability and detailed guidance rules on disclosure
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The China Banking Regulatory Commission (CBRC) issued the Measures for the Administration of the Leverage Ratio of Commercial Banks (中国银行业监督管理委员会商业银行杠杆率管理办法) (the Measures) on June 1 2011, which will go into effect from January 1 2012. The Measures will become a major regulatory tool for supervising commercial banks and other non-bank financial institutions under the jurisdiction of the CBRC. It is drafted largely on the basis of the relevant part of Basel III and follows the internationally-recognised approach to addressing the issue of over-leverage, which was highlighted during the 2008 financial crisis. Therefore, the Measures are a transplantation of international regulatory norms into the PRC regime, with necessary adjustments to suit the PRC market and market participants' needs.
There are a few salient features of the Measures that are worth analysing in further detail: